PLR 200615033: Medical problems justify waiver of IRA rollover deadline

Plain-English summary

An IRA owner withdrew funds while expecting medical expenses from heart surgery. A less expensive procedure was performed, and he intended to return the money, but his medical condition, medication changes, and a respiratory infection impaired his ability to complete a rollover within 60 days. The IRS found the submitted evidence consistent with his account and waived the deadline under section 408(d)(3)(I). It gave him 60 days from the ruling letter to contribute the amount to a rollover IRA, provided the other rollover requirements were met.

Ruling snapshot

• Question: Would the IRS waive the 60-day deadline to roll an IRA distribution back into an IRA?
• Outcome: Approved, with 60 days from the ruling to contribute the amount.
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16.

Full text (IRS public release)

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE 200615033

WASHINGTON, D.C. 20224

TAX EXEMPT AND JAN 19 2006

GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

[illegible handwritten notation]

Legend:
Taxpayer A =
IRA X =

Amount 1 =

Dear

This is in response to your request dated February 4, 2005, as supplemented by correspondence dated February 27, July 20, and October 6, 2005, in which you request a waiver of the 60-day rollover requirement contained in section 408(d)(3) of the Internal Revenue Code (the “Code’”).

The following facts and representations have been submitted under penalty of perjury in support of the ruling requested.

Taxpayer A, age represents that he received a distribution from IRA X totaling Amount 1. Taxpayer A asserts that his failure to accomplish a rollover within the 60-day period prescribed by section 408(d)(3) was due to his ongoing medical condition and medications he was taking for his condition which impaired his ability to manage his financial affairs during this period. Taxpayer A further represents that Amount 1 has not been used for any other purpose.

Taxpayer A maintained IRA X, an Individual Retirement Account (“IRA”) under Code section 408(a). Taxpayer A is totally disabled. Taxpayer A represents that in late 2004 he was scheduled for open heart surgery. In anticipation of the medical bills related to

that surgery, Taxpayer A, on withdrew Amount 1 from IRA X. Taxpayer A represents that, after the withdrawal, a less expensive procedure was able to be performed and on x, a pacemaker was inserted and Taxpayer

A intended to return Amount 1 to his IRA. However, while recovering from the surgery, changes in Taxpayer A’s medications and a severe respiratory infection impaired

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Taxpayer A’s ability to rollover Amount 1 within the 60-day period. Furthermore, Taxpayer A requested this extension shortly after expiration of the 60-day period.

Based on the above facts and representations, with respect to the distribution of Amount 1, you request a ruling that the Internal Revenue Service waive the 60 day rollover requirement contained in section 408(d)(3) of the Code.

Section 408(d)(1) of the Code provides that, except as otherwise provided in section 408(d), any amount paid or distributed out of an IRA shall be included in gross income by the payee or distributee, as the case may be, in the manner provided under section 72 of the Code.

Section 408(d)(3) of the Code defines, and provides the rules applicable to IRA rollovers.

Section 408(d)(3)(A) of the Code provides that section 408(d)(1) of the Code does not apply to any amount paid or distributed out of an IRA to the individual for whose benefit the IRA is maintained if

(i) the entire amount received (including money and any other property) is paid into an IRA for the benefit of such individual not later than the 60th day after the day on which the individual receives the payment or distribution; or

(ii) the entire amount received (including money and any other property) is paid into an eligible retirement plan (other than an IRA) for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received, except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross income (determined without regard to section 408(d)(3)).

Section 408(d)(3)(B) of the Code provides that section 408(d)(3) does not

apply to any amount described in section 408(d)(3)(A)(i) received by an individual from an IRA if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in section 408(d)(3)(A)(i) from an IRA

which was not includible in gross income because of the application of section 408(d)(3).

Section 408(d)(3)(D) of the Code provides a similar 60-day rollover period for partial rollovers.

Section 408(d)(3)(I) of the Code provides that the Secretary may waive the 60-day requirement under sections 408(d)(3)(A) and 408(d)(3)(D) of the Code where the failure to waive such requirement would be against equity or good conscience, including casualty, disaster, or other events beyond the reasonable control of the individual subject to such requirement. Only distributions that occurred after December 31, 2001, are eligible for the waiver under section 408(d)(3)(I) of the Code.

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Rev. Proc. 2003-16, 2003-4 I.R.B. 359 (January 27, 2003) provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to section 408(d)(3)(I), the Service will consider all relevant facts and circumstances, including: (1) errors committed by a financial institution; (2) inability to complete a rollover due to death, disability, hospitalization, incarceration, restrictions imposed by a foreign country or postal error, (3) the use of the amount distributed (for example, in the case of payment by check, whether the check was cashed); and (4) the time elapsed since the distribution occurred.

The information presented and documentation submitted by Taxpayer A is consistent with his assertion that his failure to accomplish a timely rollover was caused his medical condition during the 60-day period.

Therefore, pursuant to section 408(d)(3)(I) of the Code, the Service hereby waives the 60-day rollover requirement with respect to the distribution of Amount 1 from IRA X. Taxpayer A is granted a period of 60 days from the issuance of this ruling letter to contribute Amount 1 into a Rollover IRA. Provided all other requirements of section 408(d)(3) of the Code, except the 60-day requirement, are met with respect to such contribution, Amount 1 will be considered a rollover contribution within the meaning of section 408(d)(3) of the Code.

No opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the Code or regulations which may be applicable thereto.

This letter is directed only to the taxpayer who requested it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.

If you wish to inquire about this ruling, please contact Please address all correspondence

to — —
Sincerely yours,
Carlton A. Watkins, Manager
Employee Plans Technical Group 1
Enclosures:

Deleted copy of ruling letter
Notice of Intention to Disclose, Notice 437